Planning DefinedDefining the organizations objectives or goalsEstablishing an overall strategy for achieving those goalsDeveloping a comprehensive hierarchy of plans to integrate and coordinate activities

Planning is concerned with ends (what is to be done) as well as with means (how it is to be done).

Planning is defining organizational goals, establishing a strategy for reaching those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities. It can be either formal or informal, depending on the time frame and amount of documentation

Criticisms Of Formal PlanningPlanning may create rigidity.Plans cant be developed for a dynamic environment.Formal plans cant replace intuition and creativity.Planning focuses managers attention on todays competition, not on tomorrows survival.Formal planning reinforces success, which may lead to failure.

Planning may create rigidity. Assuming that conditions will remain relatively stable, formal plans lock organizational units into specific goals and time frames.Plans cant be developed for a dynamic environment. Managing chaos and turning disasters into opportunities requires flexibility, not rigid, formal plans.Formal plans cant replace intuition and creativity. Developing strategy depends as much on intuition and creativity as it does on formal analysis. Because most successful strategies are visions, not plans, merely following a systematic framework will not yield incisive thinking. Planning focuses a managers attention on todays competition, not on tomorrows survival. Formal planning stresses capitalizing on existing opportunities, not reinventing or creating an industry.Formal planning reinforces success, which may lead to failure. Success can breed failure. Since change is motivated by problems, success may not motivate managers to challenge the status quo.

Formal planning has been popular in business since the 1960s, but critics have observed the following:

The Bottom Line: Does Planning Improve Organizational Performance?Formal planning means higher profits, higher return on assets, and other positive financial results.Planning process quality and implementation contribute more to high performance than does the extent of planning.When external environment restrictions allowed managers few viable alternatives, planning did not lead to higher performance.

The evidence is mostly positive and suggests several conclusions:Formal planning in an organization is frequently associated with positive financial results. In those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit. The quality of the planning process and the implementation of the plans affect performance more than does the extent of the plans.

Planning: Focus and Time Strategic Plans

Are organization-wide, establish overall objectives, and position an organization in terms of its environment.Tactical Plans

Specify the details of how an organizations overall objectives are to be achieved.Short-term Plans

Cover less than one year.Long-term Plans

Extend beyond five years.

The short-term covers less than one year, the intermediate-term covers one to five years, and the long-term is five years or more.The commitment concept is relevant to classifying plans because the more current plans affect future commitments, the longer the time frame for which managers must plan. The length of the planning horizon increases up the management hierarchy and decisions of top management imply greater commitments of resources than decisions of lower managers. With respect to the degree of variability, the greater the uncertainty, the more plans should be of the short-term variety. This is so because shorter-term plans allow for better accommodation of change by providing more flexibility.

Strategic PlanningStrategic Plans

Apply broadly to the entire organization.Establish the organizations overall objectives.Seek to position the organization in terms of its environment. Provide direction to drive an organizations efforts to achieve its goals.Serve as the basis for the tactical plans.Cover extended periods of time.Are less specific in their details.

Tactical PlanningTactical Plans (Operational Plans)

Apply to specific parts of the organization.Are derived from strategic objectives.Specify the details of how the overall objectives are to be achieved.Cover shorter periods of time.Must be updated continuously to meet current challenges.

Specific and Directional PlansSpecific Plans

Clearly defined objectives and leave no room for misinterpretation.What, when, where, how much, and by whom (process-focus)Directional Plans

Are flexible plans that set out general guidelines.Go from here to there (outcome-focus)

It appears intuitively correct that specific plans are always preferable to directional, or loosely guided plans. Specific plans have clearly defined objectives and leave no room for misinterpretation. However, specific plans are not without drawbacks. They require a clarify and predictability that often does not exist. When uncertainty is high and flexibility is needed, directional plans are preferable. Since directional plans identify general guidelines, they provide focus but do not lock managers into specific objectives or courses of action

Single-Use and Standing PlansSingle-Use Plan

Is used to meet the needs of a particular or unique situation.Single-day sales advertisementStanding Plan

Is ongoing and provides guidance for repeatedly performed actions in an organization.Customer satisfaction policy

Some plans are meant to be used only once; others are used repeatedly. A single-use plan is used to meet the needs for a particular or unique situation. A standing plan is ongoing and guides for actions that are performed repeatedly in an organization.

Management by ObjectivesManagement by Objectives (MBO)

A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress.Links individual and unit performance objectives at all levels with overall organizational objectives.Focuses operational efforts on organizationally important results.Motivates rather than controls.

Management by objectives (MBO) emphasizes participation to set goals that are tangible, verifiable, and measurable. MBOs appeal lies in its emphasis on converting overall organizational objectives into specific objectives for units and members of the organization.

Setting Employee ObjectivesIdentify an employees key job tasks.Establish specific and challenging goals for each key task.Allow the employee to actively participate.Prioritize goals.Build in feedback mechanisms to assess goal progress.Link rewards to goal attainment.

Employees should understand what they are trying to accomplish. Managers can help employees set work goals by using the following guidelines:Identify an employees key job tasks. The employees job description can be used to define what he or she is supposed to accomplish. Establish specific and challenging goals for each key task. Performance levels, specific targets, and clear deadlines should be set for all employees.Allow the employee to actively participate. When employees participate in goal setting, they are more likely to accept the goals. Prioritize goals. The purpose of prioritizing goals in order of importance is to encourage the employee to take action and expend effort on each goal in proportion to its importance.Build in feedback mechanisms to assess goal progress. Feedback lets workers know whether their level of effort is sufficient to attain the goal. It should be frequent and recurring. Link rewards to goal attainment. Linking rewards to the achievements will help each employee to answer the question Whats in it for me?

The Organizations Current IdentityMission Statement

Defines the present purpose of the organization.Objectives

Are specific measures (milestones) for achievement, progress, and performance.Strategic Plan

Explains the business founders vision and describes the strategy and operations of that business.

First, management must identify the mission, objectives, and strategies of the organization. A mission statement defines an organizations purpose and provides guidance to managers and employees. A clear mission statement forces management to identify the scope of its products or services carefullyIt answers questions such as the following: What business are we in? What are we trying to accomplish? All organizations have strengths and weaknesses.

Analyze the EnvironmentEnvironmental Scanning

Involves screening large amounts of information to detect emerging trends and create a set of scenariosCompetitive Intelligence

Information about competitors that allows managers to anticipate competitors actions rather than merely react to them

In step two, managers analyze the environment in which the organization operates: actions of competitors, pending government legislation, preferences of customers, and supply of labor. Managers use environmental scanning to anticipate and interpret environmental changes. The term refers to screening information to detect trends, monitor the actions of others, and create scenarios. This slide and the next one review four environmental-scanning techniques: competitive intelligence, scenario development, forecasting, and benchmarking. The seeking of basic information about competitors, competitive intelligence can allow managers to anticipate rather than react to the actions of competitors. Advertisements, promotional materials, press releases, governmental reports, annual reports, want-ads, newspaper articles, databases, trade shows, industry studies, and competitors products supply 95% of the data required for this technique to work.

SWOT AnalysisStrengths (Strategic)

Internal resources that are available or things that an organization does well.Core competency: a unique skill or resource that represents a competitive edge.Weaknesses

Resources that an organization lacks or activities that it does not do well.Opportunities (Strategic)

Positive external environmental factors.Threats

Negative external environmental factors.

Management analyzes the internal resources of the organization, such as capital, skills of workers, or patents. These resources are the strengths of the organization. The strengths that represent unique skills or resources are called the organizations distinctive competence. In contrast, weaknesses are resources that are lacking in the organization.Based on the results of the SWOT analysis, management must complete step six by assessing the opportunities that are available, reevaluating its missions and objectives, and making necessary changes.

Sustaining a Competitive AdvantageCompetitive advantage counts for little if it cannot be sustained over the long-term.

Factors reducing competitive advantageEvolutionary changes in the industryTechnological changesCustomer preferencesImitation by competitorsDefending competitive advantagePatents, copyrights, trademarks, regulations, and tariffsCompeting on priceLong-term contracts with suppliers (and customers)

To sustain a competitive advantage, managers create barriers to competition through patents, copyrights, or trademarks; using economies of scale to reduce price to boost volume; locking up suppliers with exclusive contracts and lobbying for government policies to limit foreign competition.

Quality as a Strategic WeaponBenchmarking

The search for the best practices among competitors or noncompetitors that lead to their superior performance.ISO 9000 series

Quality management standards set by the International Organization for Standardization (ISO) ISO 14000

Companies achieving this certification will have demonstrated that they are environmentally responsible.

TQM focuses on quality and continuous improvement. If integrated into ongoing operations, incremental improvement can accumulate into a competitive advantage that others cannot steal. Benchmarking is the practice of using a measurable scale to compare key business operations with those of successful organizations. It involves four steps. (1) Form a team to identify the following: benchmarking targets, best practices of other organizations, and data collection methods. (2) Collect data from internal operations and external organizations. (3) Analyze data to identify performance gaps and determine their causes. (4) Prepare and implement an action plan to meet or exceed performance standards. To show that its products meet world standards for quality management, a company must gain ISO 9000 certification. The certificate attests that the company has met rigorous standards for quality and consistency as defined by the International Organization for Standardization in Geneva.

Attaining Six Sigma QualitySix Sigma

A philosophy and measurement process developed in the 1980s at Motorola.To design, measure, analyze, and control the input side of a production process to achieve the goal of no more than 3.4 defects per million parts or procedures.A philosophy and measurement process that attempts to design in quality as a product is being made.

The six sigma philosophy was developed in the 1980s at Motorola. Its premise is to design, measure, analyze, and control the input side of a production process. Rather than measuring the quality of a product after it is produced, six sigma uses statistical models, specific quality tools, high levels of rigor, and process improvement know how to design in quality as the product is being made. Accordingly, six sigma is designed to decrease defects to fewer than four per million items produced.

Planning is defining organizational goals, establishing a strategy for reaching those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities. It can be either formal or informal, depending on the time frame and amount of documentationPlanning may create rigidity. Assuming that conditions will remain relatively stable, formal plans lock organizational units into specific goals and time frames.Plans cant be developed for a dynamic environment. Managing chaos and turning disasters into opportunities requires flexibility, not rigid, formal plans.Formal plans cant replace intuition and creativity. Developing strategy depends as much on intuition and creativity as it does on formal analysis. Because most successful strategies are visions, not plans, merely following a systematic framework will not yield incisive thinking. Planning focuses a managers attention on todays competition, not on tomorrows survival. Formal planning stresses capitalizing on existing opportunities, not reinventing or creating an industry.Formal planning reinforces success, which may lead to failure. Success can breed failure. Since change is motivated by problems, success may not motivate managers to challenge the status quo.

Formal planning has been popular in business since the 1960s, but critics have observed the following:The evidence is mostly positive and suggests several conclusions:Formal planning in an organization is frequently associated with positive financial results. In those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit. The quality of the planning process and the implementation of the plans affect performance more than does the extent of the plans.

The short-term covers less than one year, the intermediate-term covers one to five years, and the long-term is five years or more.The commitment concept is relevant to classifying plans because the more current plans affect future commitments, the longer the time frame for which managers must plan. The length of the planning horizon increases up the management hierarchy and decisions of top management imply greater commitments of resources than decisions of lower managers. With respect to the degree of variability, the greater the uncertainty, the more plans should be of the short-term variety. This is so because shorter-term plans allow for better accommodation of change by providing more flexibility.

It appears intuitively correct that specific plans are always preferable to directional, or loosely guided plans. Specific plans have clearly defined objectives and leave no room for misinterpretation. However, specific plans are not without drawbacks. They require a clarify and predictability that often does not exist. When uncertainty is high and flexibility is needed, directional plans are preferable. Since directional plans identify general guidelines, they provide focus but do not lock managers into specific objectives or courses of actionSome plans are meant to be used only once; others are used repeatedly. A single-use plan is used to meet the needs for a particular or unique situation. A standing plan is ongoing and guides for actions that are performed repeatedly in an organization.Management by objectives (MBO) emphasizes participation to set goals that are tangible, verifiable, and measurable. MBOs appeal lies in its emphasis on converting overall organizational objectives into specific objectives for units and members of the organization.Employees should understand what they are trying to accomplish. Managers can help employees set work goals by using the following guidelines:Identify an employees key job tasks. The employees job description can be used to define what he or she is supposed to accomplish. Establish specific and challenging goals for each key task. Performance levels, specific targets, and clear deadlines should be set for all employees.Allow the employee to actively participate. When employees participate in goal setting, they are more likely to accept the goals. Prioritize goals. The purpose of prioritizing goals in order of importance is to encourage the employee to take action and expend effort on each goal in proportion to its importance.Build in feedback mechanisms to assess goal progress. Feedback lets workers know whether their level of effort is sufficient to attain the goal. It should be frequent and recurring. Link rewards to goal attainment. Linking rewards to the achievements will help each employee to answer the question Whats in it for me?

First, management must identify the mission, objectives, and strategies of the organization. A mission statement defines an organizations purpose and provides guidance to managers and employees. A clear mission statement forces management to identify the scope of its products or services carefullyIt answers questions such as the following: What business are we in? What are we trying to accomplish? All organizations have strengths and weaknesses.In step two, managers analyze the environment in which the organization operates: actions of competitors, pending government legislation, preferences of customers, and supply of labor. Managers use environmental scanning to anticipate and interpret environmental changes. The term refers to screening information to detect trends, monitor the actions of others, and create scenarios. This slide and the next one review four environmental-scanning techniques: competitive intelligence, scenario development, forecasting, and benchmarking. The seeking of basic information about competitors, competitive intelligence can allow managers to anticipate rather than react to the actions of competitors. Advertisements, promotional materials, press releases, governmental reports, annual reports, want-ads, newspaper articles, databases, trade shows, industry studies, and competitors products supply 95% of the data required for this technique to work.Management analyzes the internal resources of the organization, such as capital, skills of workers, or patents. These resources are the strengths of the organization. The strengths that represent unique skills or resources are called the organizations distinctive competence. In contrast, weaknesses are resources that are lacking in the organization.Based on the results of the SWOT analysis, management must complete step six by assessing the opportunities that are available, reevaluating its missions and objectives, and making necessary changes. To sustain a competitive advantage, managers create barriers to competition through patents, copyrights, or trademarks; using economies of scale to reduce price to boost volume; locking up suppliers with exclusive contracts and lobbying for government policies to limit foreign competition.TQM focuses on quality and continuous improvement. If integrated into ongoing operations, incremental improvement can accumulate into a competitive advantage that others cannot steal. Benchmarking is the practice of using a measurable scale to compare key business operations with those of successful organizations. It involves four steps. (1) Form a team to identify the following: benchmarking targets, best practices of other organizations, and data collection methods. (2) Collect data from internal operations and external organizations. (3) Analyze data to identify performance gaps and determine their causes. (4) Prepare and implement an action plan to meet or exceed performance standards. To show that its products meet world standards for quality management, a company must gain ISO 9000 certification. The certificate attests that the company has met rigorous standards for quality and consistency as defined by the International Organization for Standardization in Geneva.The six sigma philosophy was developed in the 1980s at Motorola. Its premise is to design, measure, analyze, and control the input side of a production process. Rather than measuring the quality of a product after it is produced, six sigma uses statistical models, specific quality tools, high levels of rigor, and process improvement know how to design in quality as the product is being made. Accordingly, six sigma is designed to decrease defects to fewer than four per million items produced.